Today I spoke with a journalist about medical cost ratios. At one point in the conversation he asked me if I thought managed care had the potential to contain costs, even though they seem to be adding to their bottom lines currently instead. And then it struck me – managed care companies are the ones setting the price for health care.
Let’s look at it this way – MCOs set the price of premiums, then determine how much of those premium dollars they are going to pay out on rendered services. Contrary to what the industry would have us believe, it’s not the other way ’round (services rendered drive premiums). Of course they cannot directly control utilization of servces, but they can control access to them, create ways to not pay for them, lower payments for them, and deny claims associated with them. So, if I’m an insurer, I simply need to be creative enough to figure out how to hold on to premium dollars, and then charge more to society for that privilege in the next underwriting cycle.
How else can we explain why medical cost ratios are going down and premiums are going up? At what point do insurers begin to cap their charges? Well, they won’t, because we continue to pay, pay, pay.